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U.S. Faces Challenges Combating Chinese Goods Made with Forced Labor, Report Says

Friday, August 11, 2017
Sandler, Travis & Rosenberg Trade Report

An Aug. 8 report from the U.S.-China Economic and Security Review Commission finds that the U.S. faces challenges in identifying and preventing the entry of goods imported from China that are produced with forced labor despite a 2015 law that enhanced U.S. Customs and Border Protection’s authorities in this area.

19 USC 1307 prohibits the importation of goods mined, produced, or manufactured, wholly or in part, in any foreign country by forced labor, including convict labor, forced child labor, and indentured labor. Effective March 1, 2016, the Trade Facilitation and Trade Enforcement Act closed a loophole in this law that had allowed imports of certain forced labor-produced goods if they were not produced domestically in such quantities as to meet consumptive demands. When information reasonably but not conclusively indicates that goods within the purview of 19 USC 1307 are being imported, CBP may issue withhold release orders requiring detention of those goods at all U.S. ports of entry.

Since the enactment of the TFTEA CBP has acted on its new authority four times, issuing WROs against soda ash, calcium chloride, caustic soda, potassium, potassium hydroxide, potassium nitrate, stevia and its derivatives, and peeled garlic, all from China. The USCC report states that these WROs were the first to be issued against Chinese companies since 1996 and that two of the companies in question appear to have since closed.

In June 2016 then-Commissioner Gil Kerlikowske officials told Congress CBP was also taking a number of other steps to enforce the TFTEA’s provisions on forced labor, including establishing a 24-member task force focusing on this issue, working to place more agents in other countries, reaching out to non-governmental organizations to find leads, and cooperating with State Department personnel posted overseas to monitor forced labor and other issues. Kerlikowske said CBP expected to be proactive in issuing WROs when warranted by the information gathered from these sources, noting that the standard for reasonable suspicion is “pretty low.”

However, no WROs have been issued since September 2016 despite the fact that “China maintains a network of prison labor facilities that use forced labor to produce goods intended for export,” in violation of U.S. law and U.S.-China trade agreements. According to information from the Department of labor, Chinese goods known to be associated with forced labor include artificial flowers, bricks, Christmas decorations, coal, cotton, electronics, fireworks, footwear, garments, and construction nails.

The report cites as a major challenge the opacity of China’s forced labor industry, which is “exacerbated by the use of middlemen companies to market the products in question for export, by U.S. inspectors’ lack of access to suspected sites, and by the Chinese government’s refusal to agree with the U.S. government on what constitutes forced labor and thus which products are governed by relevant bilateral agreements.” The report notes that U.S. Immigration and Customs Enforcement agents have not been permitted to make site inspections in China since 2009 and that Chinese officials still routinely deny that suspected forced labor is occurring, instead claiming that the factories in question do not exist or do not make the products in question.

The report concludes that one way to reduce the United States’ vulnerability to forced labor exports from China could be federal legislation mandating not only disclosure of corporate anti-forced labor efforts but also taking certain steps to eliminate forced labor components from supply chains based on internal corporate investigations.

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